News reports indicate that the U.S. debt shot up $238 billion after the government’s debt ceiling was lifted—which means that, for the first time ever, U.S. debt has surpassed 100 percent of GDP. Our debt now exceeds the value of our entire economy. In other words, we’re like a homeowner whose house is worth less than their mortgage—our country is officially “underwater.”
This should be a critical issue in the upcoming election. Polls show that Americans are more concerned about jobs than the national debt. But conservatives need to point out that the debt is a jobs issue. An April 2008 study by economists Carmen Reinhart and Kenneth Rogoff found that when a nation’s debt exceeds 90 percent of the size of its economy, growth is reduced by 1 or 2 percentage points. We broke 90 percent last summer, and have now broken the 100 percent barrier. Every percent in lost growth equals about 1 million fewer jobs. So the national debt is now costing America 1 to 2 million jobs a year.
What did President Obama want to do about the debt? Five months ago, he submitted a budget that would have tripled the national debt over ten years—until Republicans stopped him and forced him to agree to this week’s debt limit deal. The message conservatives need to send is this: Stimulus spending will not create jobs. To the contrary, by increasing the debt, stimulus spending actually hurts job creation. If we are going to get the economy growing again, we must begin reducing our national debt.